Lyft was launched in the summer of 2012 by Logan Green and John Zimmer as a service of Zimride, a ridesharing company the two founded in 2007.[4] Zimride focused on ridesharing for longer trips, often between cities,[6] and linked drivers and passengers through the Facebook Connect application.[7] Zimride eventually became the largest rideshare program in the United States (U.S.)[8] and some Zimride users developed lasting friendships.[9]

Similar to Zimride, Lyft connects drivers with cars to passengers that need rides. Drivers and passengers rate each other on a five-star scale after each ride,[10] and the ratings establish the reputations of both drivers and passengers within the network.[10]

In May 2013, Green and Zimmer officially changed the name of the company from Zimride to Lyft.[11] In June 2013, Lyft completed a US$60 million Series C venture financing round led by Andreessen Horowitz, increasing the total amount raised to US$83 million—the other investors were Founders Fund, Mayfield Fund, K9 Ventures, and Floodgate.[6][12] In July 2013, Lyft sold Zimride to Enterprise Holdings, the parent company of Enterprise Rent-A-Car, to enable the company to focus exclusively on the growth of Lyft.[13]

A promotional stunt was run by Lyft in November 2013, whereby drivers dressed in zombie costumes on Halloween. The promotion only involved 50 San Francisco-based drivers, who also distributed candy and Lyft discount codes.[14] During this month, the company also announced that it planned to discard its donation-based system in the state of California, after a decision from the California Public Utilities Commission (CPUC) rejected the claim that payment for Lyft's transportation services is voluntary for passengers.[1]

In late 2013, Lyft trialled the "Prime Time Tips" concept in the city of Los Angeles, providing drivers with a surcharge of up to 25 percent during peak traffic hours. The company explained that the surcharge concept aimed to provide Lyft drivers with "a greater incentive to drive when the community needs them most".[1]

Lyft’s distinctive pink mustache was the first branding the company used until 2015 when it switched to a plastic dashboard based smaller insignia

In April 2014, Lyft completed a $250 million Series D financing round led by Coatue, Alibaba, and Andreesen Horowitz, bringing its total amount raised to $332.5 million.[5]

Due to regulatory barriers in New York City, the company eventually decided to significantly alter its business model to establish Lyft in the East Coast location. The relaunch of the company, which had previously attempted to operate in the state of New York, occurred on the evening of July 25, 2014 and, in accordance with the Taxi and Limousine Commission (TLC) and the approval of the Manhattan Supreme Court, only drivers registered with the TLC were permitted to drive Lyft-branded vehicles in New York City. Lyft's signature pink mustaches remained in use for the relaunch.[15]

To address the regulatory barriers and opposition that Lyft has received since its launch, the company employed the services of two lobbying firms with strong links to the Republican Party, an action that was revealed in disclosure forms filed with the United States Senate in April 2014. Lyft's engagement of the two firms—TwinLogic Strategies and Jochum Shore & Trossevin—occurred six months after ridesharing competitor Uber hired a lobbying firm, with both occurring during a period in which ridesharing companies faced intense pressure from municipal boards and state legislators throughout the U.S.[16]

Drivers must be 21 years or older and have had a driver's license for more than 3 years[18]

Zero-tolerance drug and alcohol policy

Although Lyft drivers are classified as independent contractors, Lyft also insures each driver with a $1 million commercial liability policy that is primary to a driver’s personal policy. Any driver averaging a low rating by users is dropped from the service.

Riders must download the Lyft app to their iOS or Android-based phone, sign up, and enter a valid phone number and credit card details.[3] When a passenger wants a ride, he or she opens the app and requests a ride from a nearby driver. The app shows the driver's name, their ratings by past passengers, and photos of the driver and their car.[3]

Like many peer-to-peer startups, Lyft faces an uncertain legal and regulatory landscape, and has been criticized by entrenched commercial enterprises, including taxi services. In the fall of 2012, the California Public Utilities Commission issued a cease and desist letter to Lyft (along with rideshare companies Uber and Sidecar) and fined each $20,000. However, in 2013 an interim agreement was reached that reversed those actions.

In September 2013, the CPUC unanimously voted to make the agreement permanent, and created a new category of service called Transportation Network Companies to cover Lyft, UberX, Summon, and Sidecar — making California the first state to recognize such services.

Washington, D.C. City Council passed emergency legislation in September 2013 to allow ridesharing platforms like Lyft to operate.[19]

The Seattle City Council passed an ordinance in March 2014 that capped Lyft drivers on the road at any given time to 150. As that failed to function with Lyft's model, the company supported a coalition that submitted a referendum containing 36,000 signatures from residents that called for the ordinance to be appealed.[20] Following the signatures, Seattle Mayor Ed Murray worked with Lyft to reach a deal in July 2014 that legalized ridesharing in Seattle.

In May 2014, Lyft signed a temporary operating agreement with the city of Detroit that allows operation under a specific set of rules for two years or until new regulations are developed.[21]

In June 2014, Colorado became the first state to pass rules for TNCs through the legislative process, when S 125 was signed into law.[22]

In July 2014, the Minneapolis City Council voted almost unanimously to legalize Lyft and other Transportation Network Companies.[23]

Beyond its fundraising and user adoption numbers, Lyft has received acclaim for creating a community that makes transportation a more uplifting and fun experience. Scott Weiss of Andreessen Horowitz said they ultimately decided to invest in Lyft because of its strong community and transparency. He wrote in his blog, "Lyft is a real community — with both the drivers and riders being inherently social — making real friendships and saving money."[25] Drew Olanoff of TechCrunch wrote, "You feel like you're in the car with a friend, and that's no mistake...Whether it's bringing someone a sandwich for the ride or letting them choose the music in the car, Lyft drivers have their own budding community growing."[26] Jessica Gelt wrote in the Los Angeles Times, "Lyft's marketing strategy, which is geared toward the young and technologically savvy, draws a relaxed and friendly demographic."[27]

Lyft, like other ride-sharing services, has been criticized by state government officials[who?] from multiple U.S. states[which?] for operating what they consider to be unlicensed taxi services.

Upon expansion into Virginia in April 2014, the Virginia Department of Transportation levied a $9,000 civil penalty against Lyft for failure to register as a transportation broker. Virginia DoT had previously communicated with the company and informed them that had to register in order to provides services inside the Commonwealth. In August, state officials reversed their ruling and allowed Lyft to operate in Virginia.[28]